October 18, 2013
Actually, it didn’t explicitly say this, but that was the implication of comments from Adam Posen, the head of the Peterson Institute for International Economics. In a top of the hour news segment (sorry, no link), Posen said that the standoff will accelerate the pace at which countries throughout East Asia begin to trade in Chinese yuan instead of dollars. This will reduce demand for dollars, thereby lowering the value of the dollar.
A lower valued dollar will make U.S. exports more competitive in foreign markets. It will also make domestically produced goods more competitive in the United States leading to fewer imports. This will lead to a lower trade deficit, more growth, and jobs.
If we can reduce the trade deficit by one percentage point of GDP (@$165 billion), this would lead to close to 2 million additional jobs. With fiscal policy likely becoming more contractionary as a result of the deficit fighting craze, a lower valued dollar is the only plausible path to increased growth and more jobs in the foreseeable future.
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